The beautiful city of Amsterdam, the Netherlands, hosted the 11th annual World Bio Markets Conference in mid-March. This correspondent was invited to sit on a panel titled “Feedstocks – Securing sustainability, cost effectiveness, flexibility, and security.” Others on the panel included a financier, a crop developer, and a grower of pongamia.
It has been three years since this author last attended the event and much has changed over that time, and not just the price of oil. Previously it was called the World Biofuels Markets (co-located with the Bio-based Chemicals Conference and Exhibition). Now it is the World Bio Markets Conference, which reveals straightaway that the focus in Europe has shifted – somewhat – away from biofuels and toward bio-based chemicals and biomass power markets. This shift is already reflected in the European Union’s (EU’s) 2030 Energy Strategy that, if followed as planned, will remove the targets and mandates for transportation fuels.
First – Oil Price Prospects
No biofuels discussion would be complete without analysis of the state of the oil market. James Challinor, downstream oil and biofuels analyst at Wood MacKenzie, gave his views on the prospects for oil prices in the short- to medium-term. He is relatively optimistic that the current price dip is supply-led as demand is reasonably strong. Challinor also believes a moderate price rise can be expected, perhaps to somewhere in the $60 to $80 per barrel bracket. The “loose cannons” are the Organization of the Petroleum Exporting Countries, or OPEC, members Iran and Iraq. In their search for market share, they could over-produce and help bring prices down again. Another delegate argued that the oil price spike seen in the period before 2014 had been more of an anomaly than the current dip in prices. He expects the fundamentals of supply and demand to re-balance and feels confident that a price around $50 per barrel can be expected.
This view seemed to be shared by most of the audience, suggesting that market opportunities for biofuels will not be created by overpriced oil. The bio sector will have to fill specific supply gaps and/or serve Conference of the Parties, or COP, 21 climate change objectives.
What about Mandates for Biofuels?
Challinor felt that mandates remain the key to market penetration for biofuels in the short- to medium-term. Again, this seemed to be the consensus in the room, which included a representative from the United States Bioenergy Technologies Office, Department of Energy, who talked of the importance of policy in general and mandates in particular.
One had to feel some sympathy for one speaker, a Spanish trader in animal fats and used cooking oil, who was delighted to tell the audience that after years of arguments and contradictory policies, the Spanish government is going to introduce double counting of used cooking oil methyl esters toward the EU renewable energy targets in 2017. The only problem is the 2030 Energy Strategy contains no target for renewable fuels as a percentage of transport fuels, so after 2020 there will be no target to double count against. His efforts to change Spanish policy may thus have been in vain, which is a pity as he already imports from North Africa and South America and would be interested in finding other suppliers.
Most participants wanted mandates of some sort to be retained in the EU. Given the importance that the biofuels sector attaches to this, it was surprising that there was no speaker from the European Commission to explain the likely course of policy changes in the coming years.
The Public Image of Biofuels
Many speakers spoke eloquently of the need for the biofuels sector to work harder to improve the public image of all biofuels and renewable fuels, not just palm oil-derived fuels. Non-government organizations (NGOs) and others have stolen the moral high ground and the good news about biofuels is being swamped by the negative messages sent out by images of burning tropical forests, indirect land use change, food-versus-fuel arguments, and more. For example, a senior member of the European Parliament said recently that “ethanol was a mistake.” This implies that the biofuels sector is simply not putting sufficient resources into improving its messages. NGOs, it seems, devote plenty of money to this. It will be difficult for the biofuels industry to make up for lost ground when oil prices are low. Biofuels have simply slipped down the political agenda, particularly in the EU.
Given the importance biofuels players attach to mandates and other policy incentives, but the poor image biofuels are enduring at present, the sector certainly has its work cut out for it if it is to stop the focus shifting away from biofuels. On that note, the conference was still able to attract a number of venture capitalists and other financiers. However, one of them was adamant that he would no longer be investing in biofuels – it is the chemicals sector that interests him.
Hydro-treated Vegetable Oil
While it seems clear that the future for first generation biofuels is going to be difficult, there was more optimism among delegates about cellulosic fuels and, in particular, hydro-treated vegetable oil. An analyst on alternative fuels from Lux Research specifically mentioned investments made by Diamond Green, Renewable Energy Group, and Neste as indicative of confidence in this segment of the industry.
The pessimism about first generation fuels was not 100 percent as efforts are being made by some producers to bolt-on new technology to existing production plants.
The highlight of the conference had nothing to do with biofuels. The “exclusive guest speaker” was Sir Ranulph Fiennes, known as “the world’s greatest living explorer.” It was interesting hearing about his various escapades, but this author will not be going where he has been, whether or not the journey is powered by biofuels.
April 2016 RENDER | back